Palo Alto is known as the gateway to Silicon Valley, and welfare is not a word typically associated with the city. This area in the Bay Area (near San Francisco), has many tech startups every year move to the area to be close to the tech scene. Companies to either currently or previously be based in Palo Alto include Hewlett Packard, SAP, Facebook, Google, Paypal, VMWare, Waze, Houzz and Skype.
Home prices have doubled in the past 4 years, and Palo Alto currently has a median home price of $2.5 million. Palo Alto median income is $122k. Clearly no one earning anywhere near median income can afford to move to Palo Alto, without significant wealth.
With all the tech employment opportunities, there is a huge demand for housing in Palo Alto. In true California fashion, the local government has continuously restrict new development. With $2.5 million homes, there isn’t a property developer in America who wouldn’t jump at the chance to build apartment buildings in Palo Alto. Until equilibrium is reached, any new developments are hugely profitable.
As articles in the local newspaper Palo Alto Online show, even a new development with 10 apartments in Palo Alto, needed re-zoning, and to assign 3 of the new apartments to affordable housing.
By limiting new development, the City of Palo Alto has guaranteed that any new residents have no hope of purchasing a home, and great difficulty even affording to rent in Palo Alto. Since housing affordability is such a great issue, the City of Palo Alto Council has decided to do something about it.
Palo Alto City Council is investigating whether to allow those earning up to $250k per year access to subsidized housing. When a housing bubble starts to form in a location, there is a simple solution, allow more homes and apartments to be developed. Eventually, the number of homes will match the number of people looking for a home, and prices will reach an equilibrium.
In typical dysfunctional local government style, instead of understanding supply and demand, a small number of winners will get subsidized homes, and everyone else is stuck in market rate properties. Who decides which residents get affordable housing? When there is not enough housing in an area, we let price dictate the winners, ie if you can afford an inflated priced home, you get one. By subsidizing most of the population, but not increasing the number of homes, now some government worker gets to decide through whatever arbitrary process is decided. It is often that relatives and friends of those in government win the government subsidized home lottery.
If the government will appropriately zone for higher density housing, a housing bubble will naturally dissipate. Tax money could then be used on schools, infrastructure, and helping those truly in need (who don’t earn in the top 5% of US income earners).
Baller welfare, I guess we are heading towards socialism, where the haves and have-nots are not decided by economics, but by connections to the leaders who make those decisions.